Press Releases

Washington, D.C. - Today, the House Agriculture Nutrition Subcommittee held a joint hearing with the House Committee on Ways and Means Human Resources Subcommittee addressing how certain welfare programs and related benefits can discourage work as a result of the high effective marginal tax rates they impose on certain populations.  

Low-income families often receive benefits from multiple welfare programs, such as assistance with food, housing, and day care costs, help with medical costs, or cash payments to supplement or replace earnings from work. While these programs nominally support and encourage employment, program “phase-out rules” – especially when combined across multiple programs – mean certain households may not be significantly better off if they work or increase their earnings from work. 

Economists have studied the interaction between earnings and benefits under various programs by focusing on what are called “effective marginal tax rates,” which refers to the portion of an additional dollar of earnings effectively lost due to rising taxes and benefit reductions. Due to effective marginal tax rates that can approach or even exceed 100 percent when individuals receive benefits from multiple programs, it is possible that some individuals can be little better off financially—and in some cases even worse off—if their earnings increase. 

House Agriculture Committee Chairman K. Michael Conaway (R-TX) said: “As the Agriculture Committee continues its full-scale SNAP review - The Past, Present, and Future of SNAP - it is important to fully understand the role SNAP plays within the larger picture of federal welfare programs and ensure proper coordination. Our welfare system is vital in providing assistance to millions of vulnerable citizens, but as we heard today, it often acts as more of a trap than a safety net. Helping able-bodied recipients re-enter and remain in the workforce must be a primary objective of these programs, as employment is what makes climbing the economic ladder possible. Our policies must encourage and reward that work." 

House Ways and Means Committee Chairman Paul Ryan (R-WI) said: “Today, we have a safety net that catches people falling into poverty — and often traps them there. What we need is a safety net that lifts people out of poverty, so they can support themselves. We need to rethink how to promote opportunity in this country, and I think this hearing made a great contribution to our work.”   

Nutrition Subcommittee Chairwoman Jackie Walorski (R-IN) added: “The day a worker is offered a raise or a promotion should be a happy one, not one that causes anxiety. Sadly, though, we heard firsthand today about the painful reality of federal welfare programs in America: recipients are deterred from earning more income because of structural disincentives that can cause the loss in benefits to outweigh the gain in income. It’s imperative that we continue to examine potential solutions to ensure workers reach their full potential and have the opportunity to climb the economic ladder.” 

Human Resources Subcommittee Chairman Charles Boustany (R-LA) added: “This hearing showed that promoting work is the real key to helping people avoid poverty.  Benefits can and should serve as a temporary bridge between jobs, or to supplement earnings when someone can find only part-time work.  But those benefits need to reinforce, not undermine, the importance of work.  Redesigning welfare benefits to promote work is the key to helping people escape poverty.”